Last night, on the “Virtually Speaking” discussion about the media with Jay Rosen of NYU, we talked about the phenomenon of things that everyone in the press corp “knows” but that don’t make their way into news stories or broadcasts. One such category involves things that everyone suspects but can’t quite prove — for instance, how involved Dick Cheney and Karl Rove were in the Valerie Plame case. Or, to make it bipartisan, about Bill Clinton’s sexual behavior over the years. But another category, which I think is even more important, involves things that everyone “knows” but has stopped noticing. This is very similar to what is called “Village” behavior in the big time media.
An item in this second category has just come up: the decision of Peter Orszag, until recently the director of the Office of Management and Budget under Barack Obama, to join Citibank in a senior position. Exactly how much it will pay is not clear, but informed guesses are several million dollars per year. Citibank, of course, was one of the institutions most notably dependent on federal help to survive in these past two years.
Objectively this is both damaging and shocking.
– Damaging, in that it epitomizes and personalizes a criticism both left and right have had of the Obama Administration’s “bailout” policy: that it’s been too protective of the financial system’s high-flying leaders, and too reluctant to hold any person or institution accountable. Of course there’s a strong counter argument to be made, in the spirit of Obama’s recent defense of his tax-cut compromise. (Roughly: that it would have been more satisfying to let Citi and others fail, but the results would have been much more damaging to the economy as a whole.) But it’s a harder argument to make when one of your senior officials has moved straight to the (very generous) Citi payroll. Any competent Republican ad-maker is already collecting clips of Orszag for use in the next campaign.
– Shocking, in the structural rather than personal corruption that it illustrates. I believe Orszag (whom I do not know at all) to be a faultlessly honest man, by the letter of the law. I am sorry for his judgment in taking this job,* but I am implying nothing whatsoever “unethical” in a technical sense. But in the grander scheme, his move illustrates something that is just wrong. The idea that someone would help plan, advocate, and carry out an economic policy that played such a crucial role in the survival of a financial institution — and then, less than two years after his Administration took office, would take a job that (a) exemplifies the growing disparities the Administration says it’s trying to correct and (b) unavoidably will call on knowledge and contacts Orszag developed while in recent public service — this says something bad about what is taken for granted in American public life.
I made a mistake several days ago when lamenting Peter Orszag’s decision to take a senior job with Citibank, reportedly for several million dollars per year, so soon after leaving a senior Obama Administration post. Over the past two-plus years, Obama (and GW Bush) policies played a crucial role in saving Citi — and in not holding its executives (or other senior financial-world figures) accountable for polices that brought on the world financial crisis or reining in top-end pay as profitability has returned. Now a senior member of the Obama team — Orszag was budget director — was going straight to one of those top-end jobs, even as his former colleagues in the administration have their hands full fighting the social, economic, and political effects of the crisis on “ordinary” Americans who can’t find jobs or are losing their homes.
My mistake was not in pointing out this problem, nor in identifying it as the kind of thing that is notable precisely because no one even stops to remark on it any more. It was in the sentence that said, “Objectively this is both damaging and shocking.” That’s the difference between one-draft web postings and many-times-edited print articles. What I meant was, “Politically this is damaging and should be shocking.” Because the real point is that official Washington should notice this instance of structural corruption — but won’t.
If you’re wondering just how taken for granted such arrangements are in today’s Washington/ Versailles, here’s a data point. The Washington Post, still aspiring to be official journal of politics, has not published a single story about Orszag’s new job. Here is what its search function shows just now:
“Please try another search” indeed. How about “things that are depressing”? To their credit, the Post’s Ezra Klein and Ed O’Keefe each had one-line links on their sites, pointing to (respectively) the NYT “Dealbook” and Reuters stories on Orszag. (And those links come up if you search the Post’s site for “Orszag Citigroup.” Otherwise there appears to have been no “news” coverage by the Post. Klein also had this follow-up link to an item called “Our Peter Orszag Problem” on the Economist’s site.) The gap between the things the Post considers “scandals,” and a development like this, so taken for granted as not to merit mention, says too much about our politics.
Will Wilkinson at DiA at The Economist:
Mr Fallows hits the nail on the head, but what this structural injustice means, politically and ideologically, remains unclear. In my opinion, the seeming inevitability of Orszag-like migrations points to a potentially fatal tension within the progressive strand of liberal thought. Progressives laudably seek to oppose injustice by deploying government power as a countervailing force against the imagined opressive and exploitative tendencies of market institutions. Yet it seems that time and again market institutions find ways to use the government’s regulatory and insurer-of-last-resort functions as countervailing forces against their competitors and, in the end, against the very public these functions were meant to protect.
We are constantly exploited by the tools meant to foil our exploitation. For a progressive to acknowledge as much is tantamount to abandoning progressivism. So it’s no surprise that progressives would rather worry over trivialities such as campaign finance reform than dwell on the paradoxes of political power. But it really isn’t the Citizens United decision that’s about to make Peter Orszag a minor Midas. It’s the vast power of a handful of Washington players, with whom Mr Orszag has become relatively intimate, to make or destroy great fortunes more or less at whim. Well-connected wonks can get rich on Wall Street only because Washington power is now so unconstrained. Washington is so unconstrained in no small part because progressives and New Dealers and Keynesians and neo-cons and neo-liberals for various good and bad reasons wanted it that way. So, what is to be done? Summon a self-bottling genie-bottling genie?
The classically liberal answer is to make government less powerful. The monstrous offspring of entangled markets and states can be defeated only by the most thorough possible separation. But public self-protection through market-state divorce can work only if libertarians are right that unfettered markets are not by nature unstable, that they do not lead to opressive concentrations of power, that we would do better without a central bank, and so on. Most of us don’t believe that. Until more of us do, we’re not going far in that direction. And maybe that’s just as well. Maybe it’s true that markets hum along smoothly only with relatively active government intervention and it’s also true that relatively active government intervention is eventually inevitably co-opted, exacerbating rather than mitigating capitalism’s injustices. Perhaps the best we can hope ever to achieve is a fleeting state of grace when fundamentally unstable forces are temporarily held in balance by an evanescent combination of complementary cultural currents. This is increasingly my fear: that there is no principled alternative to muddling through; that every ideologue’s op-ed is wrong, except the ones serendipitously right. But muddle we must.
So what is to be done about the structural injustice spotlighted by Peter Orszag’s passage through the revolving golden door? How exactly do we tweak the unjust structure? If the system is rigged, how exactly do we unrig it? In which direction can we muddle without making matters worse?
But reading the coverage, I’ve been struck by a few things.
1. I’m not nearly so sure it’s about the money as other people seem to be. Orszag is fairly wealthy already (my understanding is he sold off an economic consulting firm when he became director of the Congressional Budget Office), and his lifetime of public service positions does not suggest a man particularly motivated by income. Rather, I think people are underestimating the lure of the job itself.
Orszag has gone as high as he’s likely to go in government, and he’s 41 years old. The guy isn’t done, but there’s not much more for him in Washington. So what is left for him?
Well, he could do academia or a think tank. But that’s a pretty sedate, low-stress existence compared with the tempo he’s kept up over the past few decades. Let’s say he doesn’t want to move into a wiseman or advisory role. New York Times columnist didn’t seem like a bad gig to me, but then, I’ve chosen to devote my life to similar pursuits. I’m not really sure why anyone would want to be a university president. You sometimes hear people say that he should’ve sat around and been fairly rich and respected, but I imagine that gets boring after the first decade or so.
Citigroup is a really big, really powerful institution. Orszag’s position in it is the sort of position that could one day lead to being president of Citigroup. If you’re him, and you’re trying to figure out an interesting and high-impact way to spend the next 40 years, I can see why it’s appealing. But it’s the power and the job and the opportunity, more than the money, that make it appealing.
2. The problem is less why Orszag wanted to go to Citigroup than why Citigroup wanted to hire Orszag. In Citigroup, you’re dealing with a bank that’s simply much more reliant than other banks are on connections with the American government, and other governments. Bank of America has similar needs, and so too do a couple of others, but it’s a short list.
Whether Orszag was a smart hire on these grounds is hard to say. It’s difficult to overstate how much bad will has developed between Orszag and the White House he used to serve. Some of that comes from perceived disloyalty in Orszag’s public statements — like his first New York Times column, which called for a short-term extension of all the tax cuts when the White House was arguing for the permanent extension of most of the cuts and the expiration of the cuts for the rich — but this move, which many in the administration consider politically problematic and personally distasteful, added considerably to the anger.
What Citigroup gets in Orszag is a brilliant policy mind and a deep understanding of government, not to mention a thick rolodex that certainly still has some friendly names on it. The reasons those things are valuable to Citigroup make most of us uncomfortable, and that goes double after the government bailed Citigroup out during the financial crisis. I highly doubt that the meetings between Orszag and Citigroup left him with the impression that he was getting hired to help with governmental affairs. His portfolio, in fact, is explicitly international. But I don’t know anyone who believes that it will stay that way.
Look: Peter Orszag believes–as do I–that the most basic principles of good governance mandate that the American government have a long-term plan in place to match its long-term projected expenditures with its long-term projected revenues. Peter Orszag believes–as do I–that requiring that every policy initiative be paid-for in the long-term so that it does not increase the projected debt, say, ten years out into the future is the minimum low bar that policy should be able to clear.
Barack Obama has not taken Peter Orszag’s advice: he has not proposed only initiatives that are paid-for in the long-term. He has not pledged to veto bills that raise the projected debt ten years hence.
Peter Orszag is no longer in the government.
Does he now have a duty to tell those who read his New York Times columns the same things that he told Obama when he was in government?
Or does he have a duty to tell lies to his readers about what he thinks good policy is in order to advance the interests of an administration that he is no longer part of?
I would say he has the first duty.
As I understand it, the concern is that the the job itself is a bribe. In a super-crass version of this, Firm A says to Regulator Z “you won’t be in this job forever, but if you make a lot of decisions favorable to Firm A then we’ll hire you after you quit.” In a more realistic version what happens is that Regulator Z observes that many of his predecessors have gone on to lucrative careers in Industry A and that they probably couldn’t have had if they’d pissed off all the Industry A CEOs. This biases his decision-making in a problematic way.
Sometimes I think this problem is more apparent than real. Any conceivable set of decisions that the FCC makes is going to be favorable to some set of large corporations. So being in the pocket of “big business” as such isn’t a big problem. But sometimes the problem is very real. The entire financial reform debate, for example, has featured a lot of ideas that put the interests of the financial sector as such at stake. Many observers, including Ezra Klein, have posited that shrinking the size of the financial sector overall should be a goal of reform. Obviously, though, people with an ambition to go get jobs in the financial sector are unlikely to espouse such goals.
Will at The League:
Peter Orszag’s new job at Citigroup is one of those under-discussed stories that makes me glad I read blogs. It also makes me depressed because I’m struggling to envision a plausible solution to the problems of regulatory capture and the revolving door between government and the financial services industry. You can imagine better policies arising in a lot of areas – farm subsidies, for example – if we magically removed certain political constraints, but even if you were given free reign to remake the United States’ political system, the problem of regulating an incredibly complicated financial sector would still be pretty tough to figure out.
If you’ll permit me to simplify things for the sake of brevity, the standard progressive view of the financial sector is that we need more and better regulators. This is complicated by the fact that regulation – particularly regulation that involves opaque financial practices – is complex and therefore vulnerable to companies gaming the system. Former high-level Administration officials accepting jobs at financial institutions that were just bailed out basically exemplifies these concerns.
The libertarian/conservative rejoinder is that less regulation equals less opportunities for politically-connected firms to hijack the system. As a safeguard against future financial meltdowns, I find this unsatisfying for a number of reasons: First, attempts to describe the roots of the financial crisis solely through the lens of government intervention sound pretty silly. And second, if the regulatory and administrative superstructure of government is fatally compromised by insiders and corporate lobbyists, are we sure we can successfully deconstruct that system from within? I think this is part of what liberals are getting at when they suggest the conservative movement is basically a front group for rich people and big business: sure, you might make election year noises about limited government, but genuinely populist conservative impulses take a backseat to corporate interests in a political and regulatory environment dominated by insiders. In other words, the Tea Party will never beat Goldman Sachs at its own game.